Pawnshops’ popularity in Phoenix raises concerns

Phoenix councilman sees need for service but questions clusters

People who need cash can raise it by selling unwanted items at a yard sale or through an Internet site, but selling stuff through pawnshop "is much simpler and safer," said Kriby Brown of Glendale Pawn and Jewelry.

Non-bank borrowing methods used in the past five years in Arizona, according to FINRA’s Financial Capability report. The Arizona numbers were:

Used one or more non-bank borrowing methods in past five years: 36 percent

Pawnshop: 27 percent

Auto title loan: 12 percent

Short-term “payday” loan: 12 percent

Rent-to-own store: 12 percent

Advance on tax refund (refund anticipation check): 8 percent

By Xi Chen Cronkite News ServiceMon Jun 17, 2013 12:40 PM

Arizonans were much more likely than the rest of the nation to turn to a pawnshop to get cash, according to a recent survey by the Financial Industry Regulatory Authority, or FINRA, a private non-profit.

The FINRA Foundation’s Financial Capability report found that 18 percent of Americans reported using a pawnshop within the past five years while 27 percent of Arizonans surveyed said they had done so.

In Phoenix, nearly three dozen pawnshops have cropped up during that same time period.

And that has left at least one Phoenix city councilman with mixed feelings.

On one hand, pawnshops employ people, and some need the services, Councilman Daniel Valenzuela said. However, some neighborhood leaders and constituents complain about them — especially if they become clustered in one area, he said.

“People want a diverse group of businesses in the community, and they don’t want several pawnshops in their neighborhood,” Valenzuela said. “One of the biggest issues I hear about is the crime rate. You hear about crime rates going up when it comes to any industry that deals with large amounts of cash.”

Valenzuela said he wants to bring together pawn-industry leaders and community members to “figure out what is going to work best for the city as whole.” However, he does not have a timeline for such a meeting.

Industry growth

The FINRA Foundation report was an online survey of 25,509 American adults — about 500 per state and the District of Columbia — over a four-month period in 2012.

The report’s findings came as no surprise to Kirby Brown of Glendale Pawn and Jewelry.

“Thanks to the success of television shows like ‘Pawn Stars’ on the History Channel, those who have no idea what services pawnshops actually provide have become educated and curious about how pawnshops might be of benefit to them,” Brown said.

Another reason for the booming pawn business is not new — the effect of a tough economy on middle-class families, he said.

“People need to get short-term cash,” Brown said, and they do that by turning unneeded items into much-needed cash.

“Some sell items through yard sales and popular Internet bulletin boards such as Craigslist,” Brown said. “But a pawnshop is much simpler and safer.”

He estimated that about 85 percent of pawnshop customers pay back their loans and retrieve their items.

Emmett Murphy, a spokesman for the National Pawnbrokers Association, said today’s pawn stores are attractive places to do business. And they’re growing: The association said the number of pawnshops in the country has grown from just under 6,400 in 2007 to an estimated 10,000 in 2012.

In 1991, Phoenix adopted an ordinance requiring all pawnshops in the city to obtain a use permit and locate at least 500 feet from a residential district.

During the past 22 years, the city issued 56 such permits. Officials issued more than half of those — 32 — in the past five years, from 2007 to 2012, according to the Phoenix Planning and Development Department.

The number does not include pawnshops opened before 1991.

Josh Brimhall, a partner with Pawn First in north Phoenix, said his group opened nine businesses in Phoenix about five years ago.

Brimhall said pawnshops have become more socially acceptable, and business is strong.

“I can’t say the business is up by 20 percent or 50 percent because we’ve been in the pawn business five years,” he said. “I can say I saw more people come into the industry over five years.”

Concerns

Paul Hickman, president of the Arizona Bankers Association, said pawnshop loans are not always the best deal for consumers.

“The interest rates for pawnshop loans are relatively high and you may have to pay for the additional fees such as insurance and storage,” he said.

Arizona law lets pawnbrokers collect fees at redemption or renewal, in addition to interest charged, Hickman said, “So you may end up paying $3,000 to reclaim $1,000 worth of collateral.”

Hickman said he does not see pawnshops posing a threat to banks. He said his assumption is that people go to pawnshops because they don’t have good credit, or any credit at all.

Vince Shorb, CEO of the National Financial Educators Council, said he sees a pawnshop as a place to get rid of things you no longer need.

“It is easier to go to a pawnshop than selling it on eBay,” Shorb said. “But I don’t think it’s an effective financial strategy.”

He said knowledge is the key to managing personal finances.

“Sometimes things like interest rates and getting loans can be complex and confusing even for experts,” Shorb said.

Whatever the reason, Brown knows one thing: Business is good.

“It is no doubt that the pawnshop has become a primary financial partner for many struggling Americans,” he said.

However, Murphy said he was surprised by the report’s findings.

“The percentages indicated in the report do not appear to be an accurate snapshot of pawn-store use in Arizona or on a national level,” Murphy said. He pointed to a recently released 2011 survey by the Federal Deposit Insurance Corp. that said 7.4 percent of all U.S. households have used a pawnshop.

“It does give people an option to get money, but it is not a solution for everyone,” Murphy said of the pawn business.

Posting a comment to our website allows you to join in on the conversation. Share your story and unique perspective with members of the azcentral.com community.

Comments posted via facebook:

► Join the Discussion

azcentral.com has switched to the Facebook comment system on its blogs. Existing blog comments will display, but new comments will only be accepted via the Facebook comment system. To begin commenting, you must be logged into an active personal account on Facebook. Once you're logged in, you will be able to comment. While we welcome you to join conversations, readers are responsible for their comments and abuse of this privilege will not be tolerated. We reserve the right, without warning or notification, to remove comments and block users judged to violate our Terms of Service and Rules of Engagement. Facebook comments FAQ

Join thousands of azcentral.com fans on Facebook and get the day's most popular and talked-about Valley news, sports, entertainment and more - right in your newsfeed. You'll see what others are saying about the hot topics of the day.